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SMSFundamentals: The Price Of Financial Advice

SMSFundamentals | Sep 19 2016

Do investors believe financial advice is actually worth the cost? A survey conducted by State Street Global Advisors has produced some interesting results.

SMSFundamentals is an ongoing feature series dedicated to providing SMSF trustees with valuable news, investment ideas and services, in line with SMSF requirements and obligations.

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The Price Of Financial Advice

More than half of US financial advisers claim their clients fully understand the fees and commissioned being charged to provide financial advice. Only one third of US individual investors claim to fully understand the fees and commissions being charged.

This disparity is testament to the difficult relationship that exists between investors and advisors. These are US figures but the same theme is true in Australia. Many an investor has been upset to discover in recent years that the returns they thought they might be making from their financial investments had been completely eroded by commissions taken by their advisor, and even more shocked to learn that kickbacks available to advisors were often the only incentive behind investment recommendations.

To a great extent, these experiences have driven the rapid rise in self-managed super funds in Australia. The industry, both funds managers and investment advisors, have been forced to clean up their act both through their own loss of business, and through stricter regulatory controls. The same has been true in the US on the regulatory front. Yet still only one third of investors fully understand what they’re being charged.

State Street Global Investors recently surveyed US investors to ascertain, through various questions, the answer to three general questions: What do today’s investors really think when it comes to the topic of financial advice? Do they feel financial advisory services are worth the price? How are their ideas about financial advisors affecting their investment behaviour?

The goal of the exercise is to give financial advisers an objective understanding of how investors feel about this important topic and provide them with the tools they need to gain investors’ trust and loyalty.

Australian advisors and investors would no doubt also be interested in the results.

The survey can be read at this link.

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